Why the Amount of Revenue You Make per Employee Can Be Important
When you run a growing business that employs other people, you quickly realise that payroll is one of your highest costs. Consequently, you'll want to ensure that you get value for money and not spend too much on wages (and other associated expenses) in relation to your competitors. So, in this case, what is one of the most crucial financial metrics? How can you ensure that you are staying ahead of the curve?
Understand Worker Contribution
Many accountants will use a financial indicator known as "revenue per employee." Essentially, this shows how each worker contributes to your company's financial success and productivity.
Figure out Revenue per Employee
To determine your revenue per employee, you simply need to divide your annual turnover by the number of staff members. This will then be your benchmark indicator but remember, you should temper these figures according to the type of industry and also the age of an organisation.
Understand the Metric
Employee costs are not just associated with their actual pay, as you must also factor in recruiting and training expenses. So if your company has a higher employee turnover, expect this to affect your productivity yield, making your organisation less profitable than it should be.
Gather Key Information
Where possible, gather similar information about other companies. Remember, try to pick organisations that are similar in size to yours and, of course, in the same industry. This will enable you to have a like-for-like comparison. For example, when you have a generally higher revenue per employee, this shows that your people are being more productive and that you are using best practices throughout your HR efforts.
Analyse the Statistics
One of the key questions you must ask is whether you can make the same amount of money if you have fewer people employed. Alternatively, you may want to know how many more people you need to bring on board should you want to expand and achieve a target growth volume. You may also want to bring in additional motivators to keep your personnel happy and ensure that they do their best. And you may also be able to see if employees in a certain department are costing you more than they should, which means that you may want to outsource some of that work instead.
Get Expert Advice
Obviously, statistics alone are no good unless you can analyse them and make shrewd decisions. This is why you need the services of an experienced accountant on your side. They will not only help to gather the information but advise you about what to do next.
Contact an accounting service to learn more.
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